We study a model where some investors ("hedgers") are bad at information processing, while others ("speculators") have superior information-processing ability and trade purely to exploit it. The disclosure of financial information induces a trade externality: if speculators refrain from trading,...

We study how dynamic research affects information acquisition in financial markets. In our strategic trading model, the trader performs costly research to generate private information but does not always succeed. Optimal research activity responds to market conditions and generates novel...